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Norwood Financial Corp. Announces First Quarter Earnings

HONESDALE, Pa., April 22, 2016 (GLOBE NEWSWIRE) -- Lewis J. Critelli, President and Chief Executive Officer of Norwood Financial Corp. (Nasdaq:NWFL) and its subsidiary, Wayne Bank, announced earnings of $1,876,000 for the three months ended March 31, 2016 which represents a decrease from the $2,041,000 recorded during the same three-month period of last year. The decrease was principally due to a higher level of gains on sales of securities in the 2015 period. Earnings per share on a fully diluted basis were $0.51 in the first quarter of this year compared to $0.55 in the first quarter of 2015. The annualized return on average assets was 1.00% in the first quarter of 2016 and the annualized return on average equity was 7.33%, compared to 1.15% and 8.22%, respectively, in the first quarter of 2015.

Total assets were $760.1 million as of March 31, 2016, an increase of $25.7 million, or 3.5%, compared to the prior year total. Total loans increased $46.8 million compared to March 31, 2015 consisting of a $33.7 million increase in commercial lending and $13.1 million of growth in retail loans. Total deposits decreased $9.7 million over the past twelve months due to a $25.8 million reduction in jumbo time certificates of deposit from local school districts related to delays in state funding. All other deposits increased $16.1 million including an $11.8 million increase in demand deposits. Stockholders’ equity increased $2.2 million during the past year, due principally to the retention of earnings and an increase in accumulated other comprehensive income.

Non-performing assets totaled $9.7 million or 1.28% of total assets at March 31, 2016 comprised of $6.9 million of non-performing loans and $2.8 million of foreclosed real estate owned, compared to $10.0 million of non-performing assets or 1.33% of total assets at December 31, 2015. As of March 31, 2015, non-performing assets totaled $7.4 million. Net charge-offs for the three-month period ending March 31, 2016 were $107,000 compared to $488,000 of net charge-offs in the first quarter of last year. Based on the current composition of the loan portfolio, management determined that it would be prudent to provide additional reserves and added $450,000 to the allowance for loan losses in the current period compared to $620,000 during the same period of last year. The increased provision for loan losses in 2015 reflected the higher level of net charge-offs. The allowance for loan losses was 1.35% of total loans outstanding on March 31, 2016 compared to 1.30% on December 31, 2015 and 1.16% on March 31, 2015.

Net interest income (fully taxable equivalent) was $6,534,000 during the first quarter of 2016 which is $68,000 lower than the comparable three-month period of last year. A $58.4 million increase in average loans outstanding had a positive impact on net interest income (fte) but a 40 basis point reduction in average loan yields offset much of the increase. Interest income fte was also impacted by the $17.4 million decrease in average investment securities as many securities were sold to fund the loan growth. The yield on interest-earning assets decreased 22 basis points compared to the prior year while the cost of funds increased two basis points. As a result, the net interest margin (fte) decreased from 3.94% to 3.70% compared to the quarter ended March 31, 2015. In comparison to the quarter ended December 31, 2015, the net interest margin (fte) decreased from 3.73% to 3.70%.

Other income totaled $1,067,000 in the first quarter of 2016 compared to $1,279,000 during the same period of last year. The decrease can be attributed to a $235,000 decrease in net gains on the sales of loans and securities. All other components of other income increased $23,000, net.

Operating expenses totaled $4,349,000 in the first quarter and were $162,000 higher than the same period of last year. Salaries and employee benefit costs rose $166,000 over the same period of last year due primarily to a $78,000 increase in health care costs and a $57,000 increase in salary expense. Foreclosed real estate costs were $127,000 lower than the same period of last year, while all other operating costs increased $123,000 net.

Mr. Critelli stated that “Our first quarter results provide a good start for 2016 and are in-line with our budget. Net interest income improved over the prior quarter, while credit quality ratios and costs also show improvement. Our net interest margin exceeds peer banks, core operating expenses are well controlled and our capital base remains above regulatory “well capitalized” targets. We are currently focused on our pending acquisition of Delaware Bancshares, Inc., including the integration of twelve new offices into the Wayne Bank system. The transaction is expected to close in the third quarter pending various approvals. For additional information on the transaction, please visit our website at www.waynebank.com/stockholder-services. We continue to search out opportunities available to us, and we look forward to serving our growing base of stockholders and customers as our local economy rebounds from the extended economic downturn.”

Norwood Financial Corp. is the parent company of Wayne Bank which operates from fifteen offices throughout Wayne, Pike, Monroe and Lackawanna Counties, Pennsylvania. The Company’s stock is traded on the Nasdaq Global Market under the symbol “NWFL”.

Forward-Looking Statements.
The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in federal and state laws, changes in interest rates, risks associated with the acquisition of Delaware Bancshares, Inc., the ability to control costs and expenses, demand for real estate, government fiscal policies, cybersecurity and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures
This release references tax-equivalent net interest income, which is a non-GAAP (Generally Accepted Accounting Principles) financial measure. Tax-equivalent net interest income is derived from GAAP using an assumed tax rate of 34%. We believe the presentation of net interest income on a tax–equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. The following reconciles net interest income to net interest income on a fully taxable equivalent basis:

(dollars in thousands)Three months ended March 31,
2016 2015
Net interest income$6,175 $6,307
Tax equivalent basis adjustment using 34% marginal tax rate 359 295
Net interest income on a fully taxable equivalent basis$6,534 $
6,602


NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets
(dollars in thousands, except share data)
(unaudited)
March 31
2016 2015
ASSETS
Cash and due from banks $ 8,709 $ 7,658
Interest-bearing deposits with banks 254 11,969
Cash and cash equivalents 8,963 19,627
Securities available for sale 143,948 155,674
Loans receivable 565,787 518,961
Less: Allowance for loan losses 7,642 6,007
Net loans receivable 558,145 512,954
Regulatory stock, at cost 2,982 1,838
Bank premises and equipment, net 6,390 6,632
Bank owned life insurance 18,951 18,417
Foreclosed real estate owned 2,855 1,698
Accrued interest receivable 2,487 2,329
Goodwill 9,715 9,715
Other intangible assets 260 361
Deferred tax asset 3,456 3,308
Other assets 1,952 1,806
TOTAL ASSETS $ 760,104 $ 734,359
LIABILITIES
Deposits:
Non-interest bearing demand $ 113,225 $ 101,423
Interest-bearing 447,266 468,783
Total deposits 560,491 570,206
Short-term borrowings 52,672 30,581
Other borrowings 38,856 27,807
Accrued interest payable 925 955
Other liabilities 4,462 4,359
TOTAL LIABILITIES 657,406 633,908
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, authorized 10,000,000 shares
issued: 2016: 3,724,668 shares, 2015: 3,718,018 shares 373 372
Surplus 35,390 35,239
Retained earnings 66,143 64,975
Treasury stock, at cost: 2016: 35,649 shares, 2015: 38,972 shares (987) (1,046)
Accumulated other comprehensive income 1,779 911
TOTAL STOCKHOLDERS' EQUITY 102,698 100,451
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 760,104 $ 734,359
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31, Twelve Months Ended December 31,
2016 2015 2015 2014
INTEREST INCOME
Loans receivable, including fees$ 6,135 $ 6,061 $ 24,002 $ 23,841
Securities 890 1,023 3,761 3,920
Other 1 4 16 7
Total Interest income 7,026 7,088 27,779 27,768
INTEREST EXPENSE
Deposits 581 604 2,421 2,463
Short-term borrowings 39 12 85 77
Other borrowings 231 165 752 668
Total Interest expense 851 781 3,258 3,208
NET INTEREST INCOME 6,175 6,307 24,521 24,560
PROVISION FOR LOAN LOSSES 450 620 4,580 1,680
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,725 5,687 19,941 22,880
OTHER INCOME
Service charges and fees 574 572 2,440 2,350
Income from fiduciary activities 102 105 439 437
Net realized gains on sales of securities 64 311 626 1,170
Gains on sales of loans, net 30 18 104 132
Earnings and proceeds on life insurance policies 167 165 665 685
Other 130 108 425 336
Total other income 1,067 1,279 4,699 5,110
OTHER EXPENSES
Salaries and employee benefits 2,303 2,137 8,535 8,616
Occupancy, furniture and equipment 495 556 2,082 2,117
Data processing 271 234 943 929
Taxes, other than income 205 175 711 649
Professional fees 151 183 730 671
FDIC Insurance assessment 115 95 411 420
Foreclosed real estate owned 31 158 911 1,555
Other 778 649 2,777 2,770
Total other expenses 4,349 4,187 17,100 17,727
INCOME BEFORE TAX 2,443 2,779 7,540 10,263
INCOME TAX EXPENSE 567 738 1,632 2,606
NET INCOME $ 1,876 $ 2,041 $ 5,908 $ 7,657
Basic earnings per share $ 0.51 $ 0.55 $ 1.60 $ 2.10
Diluted earnings per share $ 0.51 $ 0.55 $ 1.60 $ 2.10
NORWOOD FINANCIAL CORP.
Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended March 31 2016 2015
Net interest income $ 6,175 $ 6,307
Net income 1,876 2,041
Net interest spread (fully taxable equivalent) 3.55% 3.80%
Net interest margin (fully taxable equivalent) 3.70% 3.94%
Return on average assets 1.00% 1.15%
Return on average equity 7.33% 8.22%
Basic earnings per share $ 0.51 $ 0.55
Diluted earnings per share $ 0.51 $ 0.55
As of March 31
Total assets $ 760,104 $ 734,359
Total loans receivable 565,787 518,961
Allowance for loan losses 7,642 6,007
Total deposits 560,491 570,206
Stockholders' equity 102,698 100,451
Trust assets under management 133,421 134,391
Book value per share $ 27.88 $ 27.38
Equity to total assets 13.51% 13.68%
Allowance to total loans receivable 1.35% 1.16%
Nonperforming loans to total loans 1.21% 1.11%
Nonperforming assets to total assets 1.28% 1.01%
NORWOOD FINANCIAL CORP.
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
March 31 December 31 September 30 June 30 March 31
2016 2015 2015 2015 2015
ASSETS
Cash and due from banks $ 8,709 $ 9,744 $ 11,164 $ 8,505 $ 7,658
Interest-bearing deposits with banks 254 266 552 11,937 11,969
Cash and cash equivalents 8,963 10,010 11,716 20,442 19,627
Securities available for sale 143,948 138,851 153,305 151,304 155,674
Loans receivable 565,787 559,925 543,536 538,870 518,961
Less: Allowance for loan losses 7,642 7,298 5,747 5,947 6,007
Net loans receivable 558,145 552,627 537,789 532,923 512,954
Regulatory stock, at cost 2,982 3,412 2,488 2,240 1,838
Bank owned life insurance 18,951 18,820 18,686 18,551 18,417
Bank premises and equipment, net 6,390 6,472 6,503 6,555 6,632
Foreclosed real estate owned 2,855 2,847 1,345 1,382 1,698
Goodwill and other intangibles 9,975 10,000 10,024 10,049 10,076
Other assets 7,895 7,466 7,473 8,075 7,443
TOTAL ASSETS $ 760,104 $ 750,505 $ 749,329 $ 751,521 $ 734,359
LIABILITIES
Deposits:
Non-interest bearing demand $ 113,225 $ 107,814 $ 115,313 $ 107,610 $ 101,423
Interest-bearing deposits 447,266 443,095 456,040 468,004 468,783
Total deposits 560,491 550,909 571,353 575,614 570,206
Other borrowings 91,528 94,361 70,708 71,053 58,388
Other liabilities 5,387 4,237 5,328 4,936 5,314
TOTAL LIABILITIES 657,406 649,507 647,389 651,603 633,908
STOCKHOLDERS' EQUITY 102,698 100,998 101,940 99,918 100,451
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 760,104 $ 750,505 $ 749,329 $ 751,521 $ 734,359
NORWOOD FINANCIAL CORP.
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share data)
March 31 December 31 September 30 June 30 March 31
Three months ended 2016 2015 2015 2015 2015
INTEREST INCOME
Loans receivable, including fees $ 6,135 $ 6,058 $ 5,958 $ 5,924 $ 6,061
Securities 890 877 911 950 1,023
Other 1 1 3 8 4
Total interest income 7,026 6,936 6,872 6,882 7,088
INTEREST EXPENSE
Deposits 581 587 611 618 604
Borrowings 270 237 208 215 177
Total interest expense 851 824 819 833 781
NET INTEREST INCOME 6,175 6,112 6,053 6,049 6,307
PROVISION FOR LOAN LOSSES 450 2,820 720 420 620
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,725 3,292 5,333 5,629 5,687
OTHER INCOME
Service charges and fees 574 651 595 622 572
Income from fiduciary activities 102 99 126 109 105
Net realized gains on sales of securities 64 118 63 134 311
Gains on sales of loans, net 30 61 13 12 18
Earnings and proceeds on life insurance policies 167 167 167 166 165
Other 130 120 107 90 108
Total other income 1,067 1,216 1,071 1,133 1,279
OTHER EXPENSES
Salaries and employee benefits 2,303 2,152 2,175 2,071 2,137
Occupancy, furniture and equipment, net 495 511 473 542 556
Foreclosed real estate owned 31 475 47 232 158
FDIC insurance assessment 115 133 119 65 95
Other 1,405 1,403 1,256 1,258 1,241
Total other expenses 4,349 4,674 4,070 4,168 4,187
INCOME (LOSS) BEFORE TAX 2,443 (166) 2,334 2,594 2,779
INCOME TAX EXPENSE (BENEFIT) 567 (294) 557 631 738
NET INCOME $ 1,876 $ 128 $ 1,777 $ 1,963 $ 2,041
Basic earnings per share $ 0.51 $ 0.04 $ 0.48 $ 0.53 $ 0.55
Diluted earnings per share $ 0.51 $ 0.04 $ 0.48 $ 0.53 $ 0.55
Book Value per share $ 27.88 $ 27.39 $ 27.42 $ 27.40 $ 27.38
Return on average equity (annualized) 1.00% 0.50% 6.95% 7.80% 8.22%
Return on average assets (annualized) 7.33% 0.07% 0.95% 1.06% 1.15%
Net interest spread (fte) 3.55% 3.58% 3.53% 3.53% 3.80%
Net interest margin (fte) 3.70% 3.73% 3.68% 3.68% 3.94%
Allowance for loan losses to total loans 1.35% 1.30% 1.06% 1.10% 1.16%
Net charge-offs to average loans (annualized) 0.08% 0.92% 0.68% 0.37% 0.39%
Nonperforming loans to total loans 1.21% 1.27% 1.69% 2.00% 1.11%
Nonperforming assets to total assets 1.28% 1.33% 1.40% 1.62% 1.01%


Contact: William S. Lance Executive Vice President & Chief Financial Officer Norwood Financial Corp 570-253-8505 www.waynebank.com

Source:Norwood Financial Corp